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Principles of Management - The Success of Home Depot

Principles of Management - The Success of Home Depot

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Published by Kevin Varner

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Published by: Kevin Varner on Feb 01, 2012
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Running Head:
CONTROL AND CHANGEControl and Change: The Success of Home Depot
Trident University InternationalKevin S. Varner Principles of ManagementBHS 312Case StudyModule Number 5
Coordinator Professor:
Dr. Mickey Shachar 
Core Faculty:
Monica VargasJune 21, 2011
 
CONTROL AND CHANGE
Every organization has some form of controls in place, be they strictly administrative infunction or even mechanical style controls. Control is a necessary function of management inany type of business from the extremes of the Military to a more informal version in a “mom and pop” grocery store. Everything from the requirement of a specific size bolt used to be used on amanufacturing line, to a standard format cover sheet on a report, is a control and decided upon bymanagement at some level. These are not in themselves bad things, and are important aspects of  business. Allowing personnel to go about their job without some form of guidance as tostandardized conduct would in no way help aim the business in the desired direction. The verycreation of a Mission and Vision for any organization is the basis for controls in some form. Callit “coordination” if that makes it seem less Machiavellian, but at its base the function of management is to control.Of course there are varying levels of control in organizations and overdoing anything can be bad for the business, even being too controlling – or over controlling too quickly in anorganization that had little in the way of standardized controls at the beginning. This eventuallycould lead to problems with employees, customers and eventually lead to a drop in the bottomline; anathema to any Board of Directors, CEO’s or upper management personnel. In the case of Home Depot at the turn of the century this drastic change in control style can be clearlyillustrated. Although the company went through a record growth period, a change in theeconomic environment and years of complaints eventually led to the end of a CEO’s tenure.
Militarization of Home Depot
– At the beginning of 2000 Home Depot sales were at $46Billion with gross margins at 30% (Grow 2006). Founded at the end of the 1970’s by BernieMarcus and Arthur Blank, Home Depot managed to expand and profit at unbelievable rates,2
 
CONTROL AND CHANGE
hitting over $40 Billion in sales in just 20 years of existence. However, it was perceived asgetting to large for the more “laid back style” of its founders. So, in December of 2000 a former GE Executive, Robert Nardelli, was appointed as CEO and immediately implemented drasticchanges in the company. Apparently taking a cue from the Military Leadership model headmires, and utilizing a similar style to what he employed at GE Transportation and GE Power Systems, Nardelli began restructuring the entire corporation. Before Nardelli store managerswere given the ability to decide on how their store was run, basing decisions on their ownexperience in that location for what sold and when to stock what supplies. After he took over that changed and he implemented metrics using a combination of sales and profit targets to track how well his stores where doing. Additionally, where once the business was dominated by full-time employees, it changed with a high influx of part-time employees in an effort to drive downlabor costs. Nardelli went further in his approach and implemented hiring programs designed toincrease his number of employees with military experience bringing the totals to 13% of the345,000 personnel by 2005 (Grow 2006). He explained this by pointing to the ability of former military members to follow orders and respond to authority in the manner he was aiming for inall Home Depot employees. He implemented an evaluation system that examined employee performance on the basis of four metrics; financial, operational, customer and people skills. Thiscoupled with a two step interview process that includes role-playing exercises seems to be aimedat changing not only the make up his employees, but also the corporate culture of the entireorganization. This is evident when looking at the high turnover of the top executive in thecorporation where 98% of the top personnel were new to the job between 2001 and 2005 (Grow2006).3

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